 | Shon Chapman
has been offering quality insurance coverage for over four years. After receiving his Bachelor of Science in Sociology from Kansas State, Shon moved to Wichita and worked as a private investigator before entering the insurance industry. Shon enjoys playing golf and spending time with his wife and two children, Andrew and Caroline. He is currently an agent with American Family Insurance, offering multi-line coverage including Life, Home/Renters, Auto, and Commercial insurance. Shon holds licenses in all of these coverages for the states of Kansas and Missouri, with his primary office located in Wichita. You may contact him at (316) 721-3800 or by e-mail at schapman@amfam.com |
Insurance
2004-12-01 10:02:00
Why mortgage insurance?
: I am closing on a new house and my lender asked me if I wanted to take out "mortgage protection" on my loan in case I die. How is this different from a life insurance policy?
ANSWER: The short answer is that it is not different. In fact, the lender is usually taking out a life policy on you to pay off the loan in the event of an unforeseen death. However, there are several differences. On credit life insurance or other similar types of coverage, they are asking you to pay an extra premium monthly in order to ensure that a loan is paid off in full in the event of an untimely death. They are essentially asking you to purchase a decreasing term life policy, with the lender automatically listed as the beneficiary. Decreasing term coverage is just that - during the course of the loan, the amount of coverage on the policy goes down, usually in accordance with the balance left on the loan. In other words, as you pay the loan down, the coverage also decreases. One of the advantages is that the underwriting (generally speaking), is usually easier than a standard life policy. Sometimes, someone with borderline health may pick up this coverage because they do not feel they can qualify anywhere else. On a life policy that is NOT credit life, you have the option of purchasing level or decreasing term, whole or universal life, and so on. You also have the option of determining how much coverage you need and for how long. Most importantly, you get to decide who the beneficiary is, instead of being forced to give the money to the lender. If you have spent the proper time with your agent, and truthfully discussed your situation with him/her, you should already be properly covered. Hopefully, if that's the case, there won't be a need to purchase a credit life policy.
